Education policy based on ideology risks opening Pandora's box

Both the UK and Australia face a similar problem when it comes down to higher education: specifically the government's role in the provision of higher education to its citizens. In the space of a generation, both the UK and Australia have doubled the proportion of the population entering higher education, resulting in education costs escalating beyond affordability. Now, both nations face the tightrope of scaling back budgetary commitments on education whilst simultaneously navigating the public backlash when a government reduces investment in a core pillar of society.

As it happens, the UK and Australian governments took similar approaches to the dilemma. Both moved from near free tuition to high fees, funded by loans repaid through income-based taxation. In 2012 the UK, contrary to proclamations by the Liberal Democrats in the lead up to the 2010 general election, raised the cap on higher education to £9,000 a year. It was claimed at the time that not all universities would raise fees to the maximum level, however hindsight has proved that the provision of a student loan structure has warped the intended economics of the partially deregulated fee structure. As no student pays for their education at the point of consumption, price sensitivity to tuition fees was less elastic than had been envisaged and consequently, all universities charged the upper limit of £9,000.

Similarly, measures being drawn up by the Australian government to completely deregulate university fees would see higher education institutions free to charge unlimited fees for the right to obtain a degree. However, whilst the primary incentive for this policy is to reduce the required government funding to the sector, the motive for a completely deregulated (rather than a capped-fee structure) is to achieve the economics intended by the UK government's policy: price competition.

The introduction of a market force, such as price competition, into the higher education system was designed to drive competition in quality and value for money. Textbooks would preach that high quality universities would be able to command more for their courses, whilst underachieving universities would need to lower their fees to incentivise candidates to apply. However, whilst market forces would drive the market, it is relatively clear that one consequence of deregulation would be higher average fees. A quick look across the atlantic would reveal what awaits any nation bold enough to release deregulated capitalism on an education system: overpriced institutions that favour the wealthy. Clearly, whilst a free market approach to education yields high quality - with 27 of the top 50 global universities based in the US - it also creates educational disparity warped by inheritance.

Many in the Australian Senate fear the implications of a deregulated education system and many in the UK will no doubt follow developments down-under with interest. What is surprising however, is the lack of attention commanded by the education model implemented in countries like Germany, where great emphasis is placed on vocational courses and further education; after all, not every citizen needs to be a consultant or a lawyer. Every society still needs highly skilled labourers who build high quality houses, install state-of-the-art wind farms or manufacture efficient cars. This more practical approach to the design of an education system relies less on the ideology of educational opportunity but places more emphasis on the needs of a society to allocate resources, in this case being human capital. So while Germany marches along an educational road paved by skilled labourers, both the UK's and Australia's blind pursuit of educational reform is placing them on the highroad to realising Peter Thiel's higher education bubble.

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